Correlation Between Zhejiang Yayi and Hainan Haiqi

Can any of the company-specific risk be diversified away by investing in both Zhejiang Yayi and Hainan Haiqi at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Zhejiang Yayi and Hainan Haiqi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zhejiang Yayi Metal and Hainan Haiqi Transportation, you can compare the effects of market volatilities on Zhejiang Yayi and Hainan Haiqi and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Zhejiang Yayi with a short position of Hainan Haiqi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhejiang Yayi and Hainan Haiqi.

Diversification Opportunities for Zhejiang Yayi and Hainan Haiqi

0.9

Correlation Coefficient

Zhejiang Yayi  Hainan Haiqi

Almost no diversification

The 3 months correlation between Zhejiang and Hainan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang Yayi Metal and Hainan Haiqi Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Haiqi Transpo and Zhejiang Yayi is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Zhejiang Yayi Metal are associated (or correlated) with Hainan Haiqi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Haiqi Transpo has no effect on the direction of Zhejiang Yayi i.e., Zhejiang Yayi and Hainan Haiqi go up and down completely randomly.

Pair Corralation between Zhejiang Yayi and Hainan Haiqi

Assuming the 90 days trading horizon Zhejiang Yayi Metal is expected to generate 1.27 times more return on investment than Hainan Haiqi. However, Zhejiang Yayi is 1.27 times more volatile than Hainan Haiqi Transportation. It trades about 0.17 of its potential returns per unit of risk. Hainan Haiqi Transportation is currently generating about 0.17 per unit of risk. If you would invest  1,835  in Zhejiang Yayi Metal on September 22, 2024 and sell it today you would earn a total of  812.00  from holding Zhejiang Yayi Metal or generate 44.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Zhejiang Yayi Metal  vs.  Hainan Haiqi Transportation

Zhejiang Yayi Metal

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Yayi Metal are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Yayi sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Haiqi Transpo

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Haiqi Transportation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Haiqi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhejiang Yayi and Hainan Haiqi

The main advantage of trading using opposite Zhejiang Yayi and Hainan Haiqi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang Yayi position performs unexpectedly, Hainan Haiqi can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hainan Haiqi will offset losses from the drop in Hainan Haiqi's long position.

The idea behind Zhejiang Yayi Metal and Hainan Haiqi Transportation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.